How Real Estate Firms and State Associations are Confusing the General Public

If your are a potential home buyer - please be aware that agents and their companies are prostituting the term "Exclusive" - by sometimes calling themselves an "Exclusive Buyer Agent" or having you enter into an "Exclusive Buyer Agreement"

The official definition from NAR back in the 1990s is that an Exclusive Buyer Agent never lists property for sale - nor does their company - to avoid the conflicts of interest that typical "buyer agents" have. The term "Exclusive" is critical - because the meaning is just that --- exclusively representing buyers.

A traditional buyer agent - can offer you no more than Exclusive Right to Represent Agreement (which means that they are the only agent that is representing you) - which is a far cry from an "Exclusive Buyer Agency Agreement" which means that you are working with an agent that is representing you, but that they and their office never represent sellers. BIG DIFFERENCE.

When they dilute the meaning of the term "Exclusive", and confuse the general public - no one can understand the difference in the type of representation that is offered.

In fact - under an Exclusive Right to Represent Agreement-- that agent may only be temporarily "designated" to represent you. If you become interested in one of their own listings- they suddenly don't represent you anymore -- either declare dual agency on you - or shuffle you off to another agent in their office for you to work with ("Designating them") -- who you may not want to work with at all.

At that point - that agent that WAS supposed to be representing you - is not supposed to tell the seller what they know about you...but at the same time, they are legally representing the seller and working in their best interest. So - as a consumer - can you see the problem here??

I hope so.

And what you - as a home buyer - aren't told - is that every other agent in that agent's office is your adversary....and that there could be overheard phone conversations, that there are shared fax machines and file cabinets, and that your agent may have biases towards showing more in-house listings or worse - their own listing -- because perhaps they get a bigger commission split if they push an "in-house" listing on you. Agents don't disclose these 'issues" to you.

When you understand that this can happen with a traditional agent - and that you get better representation from an Exclusive Buyer Agent for no extra cost (everything is built into the transaction) - using an Exclusive Buyer Agent when you are buying becomes a "no brainer."

Unfortunately - as a home buyer - you aren't told upfront what an Exclusive Right to Represent Agreement really means. And worse yet - most buyers in Illinois sign no agreement at all. This means that agents have carte blanche ability to deceive you. Across the US (and in Illinois) there is less than a 12% disclosure rate.

If you have no contract with an agent - they are supposed to disclose that they might suddenly not be representing you at one point -- upon first contact with you (or if you sign an Exclusive Right to Represent agreement with them - within that agreement) but since most buyers don't have a contract with an agent in Illinois - most of the agents are disclosing this fact way too late -- contract signing (which isn't legal).

Consumers deserve better...

Why Dual Agency and Designated Agency Are "Legal" Even Though They are Bad for the Consumer

Dual agency, designated agency, transaction broker, and facilitator are all efforts to undermine and circumvent the common law of agency. During the past ten years - The National Association of Realtors (NAR) issued instructions to all state and local associations to ask for new state laws that specifically abrogate the common law of agency.

The common law of agency dictates that the agent/firm must put the interests of the client/principal ahead of all others, including those of the agent/firm.

Agency disclosure in the late 1980s revealed that an in-house sale might be impossible if both sellers and buyers requested representation. The fact that dual agency was, and is, dangerous for the agent, and an oxymoron by definition, gave rise to possible alternatives to save the in-house sale and the 10 billion dollars it brings.

To get around the drawbacks of "dual agency" - states have been adopting "designated agency". The is the case in Illinois - and most recently - Wisconsin - where the employing broker designates one agent within his/her office to be an agent for the seller and another agent within her/his office to be the agent for the buyer. However - designated agency is really undisclosed "dual agency" - and not very good for the consumer. Unfortunately "designated agency" has been legalized in Wisconsin, Illinois and many other states - in order to assure that traditional Real Estate companies can maintain and legalize the "double dip" - despite all the conflicts of interest for the consumer. It is about greed - rather than what is best for the consumer.

Law firms don't allow you to hire an attorney while your adversary uses another attorney at the same firm. So why should this be legal in Real Estate? Greed. The buyer's information and negotiation power can be compromised in these offices.

As a buyer - if you have one agent in the office representing you - all the other agents in that same office are your adversaries. As a buyer - there is a good chance that your confidential information may be compromised through shared fax machines, file cabinets - overheard phone conversations etc.

So who is it then that benefits from these new real estate laws? Usually its the party that initiates new legislation that has the most to gain. NAR and state associations do the leg work because they are beholden to the membership - 99.9% of which represent "both sides" to get the double dip - and use the seller's money very inefficiently (print ads which are known to be less than 2% effective in helping sell the home (of course - no agent tells the seller that) - but generate "buyer leads" for the agent - using the seller's money. Nothing like free advertising on the seller's dime..) Who represents the public?

Unfortunately - the state real estate associations (with the exception of Ohio) do not disclose the existence of the consumer option of Exclusive Buyer Agency in their "Consumer Options" brochures. The board on the State Associations are typically members of the mega-brokers - who of course - advance their own interests to the detriment of the consumer - and they surely don't want the consumer to know about the existence of Exclusive Buyer Agents. (It would be a no-brainer to use them if the public knew.... so fostering disclosure of it it - would be a major threat to their business model.) Who wouldn't want a better form of buyer representation for the same price? (i.e. - nothing out of pocket to the buyer)

Though Exclusive Buyer Agency represents a much higher level of representation to the buyer - the clout and special interest groups and PAC money of the large brokerages ensure that the general public is left in the dark.

The fact that dual agency was, and is, dangerous for the agent, and an oxymoron by definition, gave rise to "designated agency" (which is really dual agency is sheep's clothing) to save the in-house sale and the 10 billion dollars it brings.